January was a wild month in the stock market as a whole. A sharp correction led by growth stocks dragged major indexes lower. It’s hard to point to a small handful of stocks that moved the market when volatility was so high across the board. Still, a look at some of the larger companies that had the biggest swings reveals some important trends in the market right now.
Rivian Automotive (NASDAQ: RIVN) is an electric vehicle (EV) stock that rode investor fervor sky-high before tumbling. It was down 37% last month. The market was excited by the prospects of a high-quality, disruptive rival to Tesla (NASDAQ: TSLA). In particular, Rivian seemed to have an opportunity to carve out a niche in trucks and cargo vans. None of the EV competitors have distinguished themselves in those vehicle classes yet. It also had support from Amazon (NASDAQ: AMZN) in the form of investment and tentative orders.
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Rivian is a quintessential hype stock that climbed higher with momentum, then collapsed when investors refocused on fundamentals. The company has a promising future and lots of potential, but it only produced 1,000 vehicles in the fourth quarter. Even taking into consideration the company’s 70,000 pre-orders and 600,000-vehicle annual production capacity, it’s hard to justify its previous $120 billion valuation. In comparison, Ford (NYSE: F) is an established, global, $80 billion company that sold 500,000 vehicles last quarter alone.
Rivian’s entire investment thesis is built on potential. Growth stocks like this one are understandably getting crushed as investors turn away from risk assets.
Netflix (NASDAQ: NFLX) is experiencing a whole different challenge that drove shares 29% lower in January. The stock’s price-to-sales ratio climbed steadily over the past decade as its streaming service grew into a juggernaut that completely changed consumer entertainment. Its valuation ratios peaked a few years ago, when it was commonly mentioned in the same breath as tech giants Meta Platforms (NASDAQ: FB), Apple (NASDAQ: AAPL), Amazon, and Alphabet (NASDAQ: GOOGL).
Competition has risen from all angles over the past few years, and Netflix’s most recent quarterly earnings report indicates a drastic slow-down in subscriber growth. Investors are concerned that Netflix is nearing saturation …….